What Is Mortgage Points Philippines - Should You Pay Points When Refinancing

Mortgage points — sometimes called discount points — are optional, upfront fees you pay to a lender at closing in exchange for a reduced interest rate on your home loan. Each point equals exactly 1% of your total loan amount. So if your loan is ₱4,000,000, one mortgage point costs ₱40,000.

There are two types of points you may encounter:

• Discount points: Prepaid interest that lowers your ongoing interest rate. This is what most people mean when they say "mortgage points."
• Origination points: Fees charged by the lender simply to process and underwrite your loan. These do not reduce your rate — they are just a cost of getting the loan.

It is critical to clarify with your lender or broker which type of points you are being quoted, because only discount points provide a long-term rate benefit. Origination points are purely a cost with no offsetting rate reduction.

The concept of mortgage points is less standardised in the Philippines compared to markets like the United States, but the underlying mechanics are the same. Philippine banks — including BDO, BPI, Metrobank, Security Bank, and RCBC — may offer borrowers a choice between a slightly higher rate with no upfront fee, or a lower rate in exchange for paying a fee at closing.

In the Philippine context, you may see this structured in several ways:

• A lender offers you a 7.50% rate with zero points, or a 7.00% rate if you pay 1% of the loan amount upfront.
• A processing or buy-down fee is baked into the loan offer with the rate already adjusted — meaning you are effectively paying points whether you realise it or not.
• During a refinance, a bank may waive certain fees in lieu of a slightly higher rate (this is known as "negative points" or a lender credit).

Because these structures vary significantly from bank to bank, it is important to ask each lender to show you both the all-in cost and the effective interest rate so you can make an apples-to-apples comparison.

One mortgage point costs 1% of your loan amount. Here is what that looks like across common Philippine loan sizes:

• ₱1,500,000 loan → 1 point = ₱15,000
• ₱3,000,000 loan → 1 point = ₱30,000
• ₱5,000,000 loan → 1 point = ₱50,000
• ₱8,000,000 loan → 1 point = ₱80,000
• ₱10,000,000 loan → 1 point = ₱100,000

The rate reduction you receive in exchange varies by lender and market conditions, but a common rule of thumb is that one point reduces your rate by approximately 0.25% per year. Some lenders offer as much as 0.50% per point, while others offer less.

Let's look at a concrete example. Suppose you are refinancing a ₱5,000,000 loan over 20 years. Your lender offers you either 6.50% with no points, or 6.00% if you pay one point (₱50,000 upfront).

• Monthly payment at 6.50%: approximately ₱37,370
• Monthly payment at 6.00%: approximately ₱35,820
• Monthly savings: approximately ₱1,550
• Break-even: ₱50,000 ÷ ₱1,550 = approximately 32 months (about 2 years and 8 months)

After that break-even point, every month you stay in the home you are ahead financially. Use Nook's refinance break-even calculator to run this analysis for your own loan details.

Not all Philippine banks use the term "mortgage points" explicitly, but many do offer rate buy-down structures or tiered pricing that functions the same way. Here is a general overview:

• BDO and BPI: Occasionally offer promotional fixed-rate periods where paying a larger processing fee upfront can result in a lower rate. These are more common during refinancing campaigns.
• Security Bank and RCBC: Known for competitive refinancing packages that sometimes include fee-versus-rate trade-off options.
• Metrobank and Chinabank: Tend to offer more standardised rate cards, though negotiation is possible especially for larger loan amounts (₱5,000,000 and above).
• Pag-IBIG (HDMF): Does not offer discount points in the traditional sense. Pag-IBIG rates are set by government policy, though members can benefit from the Multi-Purpose Loan facility and other programmes.

One practical tip: never assume the first rate you are quoted is the only option. Always ask your loan officer, "Can I get a lower rate if I pay an additional fee upfront?" The answer will quickly tell you whether a points-style structure is available.

The honest answer is: it depends on your time horizon. Paying points is a bet that you will stay in your home long enough for the cumulative monthly savings to exceed what you paid upfront. If that condition is met, paying points is financially rational. If you plan to sell or refinance again within a few years, paying points is likely a losing proposition.

Here is a simple framework to guide your decision:

• Pay points if: You plan to stay in the home for 5+ years, your break-even period is under 36 months, and you have the cash available without straining your emergency fund.
• Skip points if: You may sell or refinance again within 2–3 years, you need that cash for renovations or other expenses, or the rate reduction offered per point is less than 0.20%.
• Consider negative points (lender credits) if: Your budget is tight and you'd rather have the bank cover some closing costs in exchange for a slightly higher rate.

It is also worth noting that in the current environment, many Filipino homeowners are still paying 7%–10% on their existing loans. Refinancing to a rate of 5.99% p.a. — even without paying any points — can already deliver significant savings. Try the Nook refinance calculator to see how much you could save with and without paying points.

The break-even period tells you exactly how long it takes to recoup the upfront cost of paying points through your monthly savings. The formula is straightforward:

Break-Even Months = Total Points Cost ÷ Monthly Payment Reduction

Here is a worked example for a ₱6,000,000 loan refinanced over 20 years:

• Option A: 6.75% with no points → monthly payment ≈ ₱45,640
• Option B: 6.25% with 1 point (₱60,000 upfront) → monthly payment ≈ ₱43,910
• Monthly savings: ₱45,640 − ₱43,910 = ₱1,730
• Break-even: ₱60,000 ÷ ₱1,730 = approximately 35 months (just under 3 years)

After month 35, you are saving ₱1,730 every single month for the remaining life of the loan. Over a full 20-year term, you would save approximately ₱415,200 in total — minus the ₱60,000 upfront cost — for a net gain of around ₱355,200.

A few important nuances to keep in mind:

• If you refinance again before the break-even point, you lose the benefit of the points you paid.
• Consider the opportunity cost — that ₱60,000 invested elsewhere might also grow over time.
• Always factor in other refinancing costs (documentary stamp tax, notarial fees, appraisal) to get your true total break-even.

Use Nook's break-even calculator to run a personalised analysis in minutes.

Unlike in the United States, the Philippines does not have a broadly available mortgage interest deduction for individual taxpayers on their primary residence. The Bureau of Internal Revenue (BIR) does not allow individual homeowners to deduct home loan interest or points paid from their personal income tax.

However, there are limited exceptions:

• Self-employed individuals and professionals: If you use a portion of your home exclusively for business purposes, you may be able to claim a proportional deduction for interest and financing costs. You should consult a licensed CPA or tax adviser to determine your eligibility.
• Corporations and businesses: If a property is held under a corporate entity and used for business, interest expenses — including points — may be deductible against business income, subject to BIR rules and limitations under the TRAIN Law.

For the vast majority of employed Filipinos buying or refinancing a personal home, mortgage points are not tax-deductible. Your decision to pay points should be evaluated purely on a cash-flow and break-even basis, not on any expected tax benefit.

This is one of the most practical financial trade-offs Filipino homebuyers and refinancers face. Both options require upfront cash and both reduce your total interest paid — but they work differently.

Paying mortgage points: Reduces your interest rate, which lowers every monthly payment for the life of the loan. The benefit is proportional to how long you hold the loan.

Larger down payment / principal reduction: Reduces the loan balance on which interest is calculated. Because interest is charged on the outstanding balance, this can compound over time into significant savings — especially in the early years of a loan where interest makes up the bulk of each payment.

As a general guide:

• If your loan-to-value (LTV) ratio is above 80%, a larger down payment can also help you avoid or reduce mortgage insurance premiums — an immediate and guaranteed saving.
• If your LTV is already below 80%, paying points may be the better use of extra cash, provided your break-even period is within your expected holding period.
• If your current rate is high (7%+), simply refinancing to the lowest available rate — such as 5.99% p.a. — will likely deliver more savings than either option on its own.

The right answer depends on your specific numbers. Use the Nook prepayment calculator to model what happens if you apply a lump sum to your principal, and compare that to the savings from buying down your rate with points.

Yes — and more Filipino borrowers should do this. Banks in the Philippines have more flexibility on fees and rates than many people realise, particularly for refinancing (where you are an existing borrower with a proven payment track record) and for larger loan amounts.

Here are practical strategies for negotiating:

• Use competing offers as leverage: If Bank A offers you 6.50% with one point and Bank B offers 6.25% with no points, tell Bank A what you have been offered. Banks often match or beat competitive rates to win or retain your business.
• Ask to reduce origination points: These are pure profit for the bank and are often negotiable, especially if you have a strong credit history and a stable income.
• Request a rate-points menu: Ask your loan officer to show you the full pricing grid — what rate you get at 0 points, 0.5 points, 1 point, and so on. This lets you see exactly what you are buying and make an informed choice.
• Negotiate the lock period: A longer rate lock (e.g., 60 days vs. 30 days) sometimes costs a fraction of a point. If you don't need a long lock, waiving it can save money.
• Work with a broker: Nook's service is 100% free to borrowers. We negotiate with multiple banks on your behalf and present you with the best available offers side by side, so you never have to haggle alone.

The best refinance rate currently available through Nook is 5.99% p.a. — and in most cases, borrowers can access this rate without paying discount points. This is significant because most Filipino homeowners with existing loans are still paying between 7% and 10%, meaning the savings from simply switching to a better deal can be substantial even before any points come into play.

To put that in perspective, consider a ₱5,000,000 loan with 20 years remaining:

• At 8.00%: monthly payment ≈ ₱41,820 | total interest paid ≈ ₱5,036,800
• At 5.99%: monthly payment ≈ ₱35,720 | total interest paid ≈ ₱3,572,800
• Total interest saved: approximately ₱1,464,000 — without paying a single point

Of course, every borrower's situation is different. Your rate will depend on your loan amount, remaining term, property type, income, and the bank's current promotions. The best way to find out exactly what rate you qualify for — and whether paying any points would make sense in your case — is to let Nook compare offers from multiple banks on your behalf. The service is completely free, and there is no obligation to proceed.

Check current home loan interest rates in the Philippines to see how your existing rate compares to what is available in the market today.